S Korea’s LG Chem earnings to rise sharply in 2021 – Moody’s

SINGAPORE (ICIS)–South Korean producer LG Chem’s earnings are expected to rise significantly this year, supported by strong contributions from the company’s petrochemical and battery businesses, Moody’s Investors Service said on Wednesday.

Moody’s expects LG Chem’s adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) to rise to around won (W) 7.1 trillion this year from around W4.1 trillion in 2020, it said in a note.

The growth will be supported by strong product spreads in its petrochemical business, as well as solid sales growth and improving profitability at its battery business.

The likelihood of an initial public offering (IPO) at wholly-owned battery subsidiary LG Energy Solution (LGES) will also bring in “large proceeds and will provide a significant financial buffer at the LG Chem consolidated level against its ongoing large capital spending,” said Wan Hee Yoo, a Moody’s vice president and senior credit officer.

The potential IPO aims to be completed over the next few months, Moody’s said.

Moody’s expects LG Chem’s reported debt to increase to W13.0 trillion-W14.0 trillion by the end of 2021 from around W10.2 trillion as of the end of 2020, despite proceeds from asset sales.

The debt increase is mainly to fund large-scale investments at its key businesses as well as working capital deficits.

LG Chem has plans to increase its electric vehicle (EV) battery capacity to 260 gigawatt hours (GWh) or more by the end of 2023 from around 120 GWh at the end of 2020.